In Cheetah Omni v. AT&T Services, the U.S. Court of Appeals for the Federal Circuit recently issued a decision that stresses the importance of meticulously drafting license agreements.

In February, the court denied an attempt by Cheetah, an optical products developer, to revive its patent infringement suit against AT&T and Ciena Communications, ruling that the defendants were impliedly licensed under the patent-in-suit, U.S. Patent 7,522,836. In an earlier suit, Cheetah had asserted a separate patent, U.S. Patent 7,339,714, against Ciena. That suit was settled with Cheetah's grant of an irrevocable license to Ciena and its affiliates to "Licensed Patents" which, as defined, included the '714 patent and all parents and related patents. Notably, the '714 patent is a continuation-in-part of U.S. Patent 6,943,925, which, as the grandparent of the '714 patent, is an expressly licensed patent under the agreement; the at-issue '836 patent is a continuation of a continuation of the '925 patent.

The Federal Circuit was tasked with assessing whether Cheetah had impliedly licensed the '836 patent because it had already licensed that patent's "uncle" and "grandparent." Citing its previous ruling in General Protecht Group v. Leviton Manufacturing Company, the court answered in the affirmative, ruling that an implied license arises "where a patentee has licensed or assigned a right, received consideration, and then sought to derogate the right granted."

Citing another of its precedents, TransCore v. Electronic Transaction Consultants, the court reasoned that legal estoppel provides an implied license to a related, later-issued patent that was broader than and necessary to practice an expressly licensed patent. In addition, General Protecht held that an express license to a patent includes an implied license to its continuations, including where the continuation claims are narrower than the claims of the expressly licensed patent. Consequently, because Cheetah had expressly licensed the '925 patent, the grandparent to the '836 patent, Cheetah had impliedly licensed the '836 patent to Ciena and its affiliate AT&T, the court said.

This decision also makes clear that "the timing of patent issuance is not material to the policy rationale underpinning [the] implied license presumption." In short, an implied license may arise regardless of whether the patent in question was issued prior or subsequent to the execution of the agreement.

Because the analysis in General Protecht revolved around an agreement that had been executed before the issuance of the continuation patent the court found was impliedly licensed, Cheetah argued that that holding did not extend to patents existing at the time of the agreement. The Federal Circuit disagreed, concluding that it is easier for parties to identify an already-issued patent and expressly exclude it from a license if it so chooses. Likewise, the court rejected Cheetah's argument that there was no implied license because the '836 patent covers a different, narrower invention because "the same inventive subject matter was disclosed in the expressly licensed patents."

The Cheetah decision reinforces the importance of precisely delineating which patents are and are not included in a license. The license agreement between Cheetah and Ciena did not explicitly identify the '836 patent, a fact that Cheetah argued weighed against an implied license. Nonetheless the Federal Circuit concluded that the naming of certain patents "does not evince a clear mutual intent to exclude other patents falling within the general definitions in an agreement." The fact that

One year ago, the U.S. Supreme Court held in Fourth Estate Public Benefit Corp. v. Wall-Street.com that an approved or rejected application for registration is a nationwide prerequisite for initiating a copyright infringement suit under § 411(a) of the Copyright Act, serving as a helpful reminder of the importance of prompt and timely registration with the U.S. Copyright Office.

Copyright registration is relatively straightforward. Standard registration requires (1) completing an application, (2) paying an application fee, and (3) depositing material to identify the work with the Copyright Office. Note that the effective date of the registration is the date the Copyright Office receives all completed materials.

Copyright registration, although not necessary for copyright ownership, offers many benefits, including:

  • Evidence of validity. A registered copyright, if registered within five years of publication, establishes a prima facie case of validity for both the copyright itself and the facts stated in the registration certificate.
  • Statutory damages. The question of damages in a copyright infringement lawsuit is a fact-specific inquiry that requires a showing of actual damages, such as lost sales and opportunities, and the infringer's profits attributable to the infringement, each to a high degree of certainty. A valid copyright registration made either (1) prior to infringement, or (2) within three months of publication of the work enables copyright owners to bypass this inquiry and, if they wish, seek statutory damages between $750 and $30,000 per infringement, and up to $150,000 in the case of willful infringement. Moreover, a court may also award filing fees and reasonable attorneys' fees in favor of a copyright owner.

Additionally, a registered copyright will provide:

  • A public record of ownership. While copyright automatically vests in the author of a creative work under the Copyright Act, a copyright registration provides evidence of ownership and can cut off certain defenses of so-called innocent infringement.
  • Protection from infringing exports. A registered copyright can be recorded with the U.S. Customs and Border Protection for protection against the importation of infringing works.
  • Satisfaction of deposit requirements. The deposited work submitted during the registration process will fulfill the mandatory deposit requirement under § 407 of the Copyright Act.

There are minimal downsides to copyright registration. The registration fee is non-refundable, and the Copyright Office may need four to six months to process an online application and longer for applications sent by mail, especially during the pandemic when paper applications will not be examined. However, unregistered works that are infringed still require registration before filing a lawsuit, which could require payment of an additional Copyright Office fee (currently $800) to expedite review within five to 10 business days. The copyright owner would not be eligible to claim statutory damages or attorneys' fees if the expedited registration occurs more than three months after first publication. Please note, however, that the CARES Act authorized the Copyright Office to extend the three-month window for those applicants who can show that the pandemic prevented them from complying with the deadline and who submit a statement certifying under penalty of perjury that they would have met the three-month deadline but for the emergency. For instance, an applicant may be eligible for an extension of the three-month window if she is unable to mail physical deposit materials to the Copyright Office or lacks access to a computer.

Given the importance of registration and the additional benefits of completing the process early on, it is always a best practice to register copyrights promptly after publication.

Originally Published 21 April, 2020

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